Call Seen In 7-7.25% Range

MONEY MARKET

Money markets are expected to remain quiet throughout the week as banks are likely to avail of the better cash management facility that has been applicable since the beginning of this fortnight. Call money rates should stay range bound between 7-7.25 per cent for most of the week as liquidity appears to be easy as of now.

"The 65 per cent rule for daily cash reserve maintenance would allow banks more flexibility, but any complacency could lead to a spike in call money rates later in the fortnight. There also appears to be too many repo bids which might put some pressure on liquidity later," said a market dealer in a private sector bank.

 

The repo outflows of Rs 3,500 crore did not affect the market much. What has really been surprising is that although overnight call rates remained over 5 per cent on Friday last, there was one huge repo bid for Rs 3,500 crore. "There seems to be surplus cash with some nationalised banks," said a dealer.

Rumours of a possible private placement during this week might lead to greater enthusiasm in buying government securities. However, till the announcement comes through, the market is expected to be lacklustre. Some interest might continue in the short- and medium-term securities at the same time, though.

Inflows exceed outflows comfortably this week. Outflows include only those due to treasury bill auctions amounting to Rs 300 crore. Inflows amount to Rs 1,948.65 crore which are mostly due to coupon inflows.

On May 9, Rs 330 crore would be entering the market with the larger inflow of Rs 230 crore on account of a coupon inflow on the 11.5 per cent 2004 government paper. The remaining is due to the redemption of the 182 day treasury bill. An inflow of Rs 190.35 crore would accrue on May 10 due to a coupon inflow on the 12.69 per cent 2002 government security.

There are two inflows of Rs 100 crore and Rs 88 crore on Saturday when one 14-day and a 91-day treasury bill would be redeemed. Major inflows are expected on Friday when more than Rs 1,000 crore would be entering the market. The coupon on 11.83 per cent 2014 government security on the same day would result in an inflow of Rs 680.23 crore.